Company Bond Risk Falls to Nine-Month Low as European Sales Slow

Dec. 12 (Bloomberg) -- The cost to insure company debt from
default fell to a nine-month low in Europe on optimism Greece’s
bond buyback will unlock aid and the Federal Reserve will
announce steps to stimulate economic growth.

The Markit iTraxx Europe Index of credit-default swaps on
125 investment-grade companies fell 1 basis point to 114, the
lowest since March 27. Bond issuance slowed with only JPMorgan
Chase & Co. and cable maker Nexans SA selling debt after the
busiest start to a December since 2008.

The Federal Open Market Committee will probably announce
$45 billion in monthly Treasury buying after a two-day meeting
that ends today, a Bloomberg News survey of economists showed.
Greece said investors tendered enough bonds in its buyback offer
to free up International Monetary Fund and European Union funds,
a government official said yesterday.

“In the absence of any immediate negatives, and in
anticipation of FOMC policy action, it’s likely we’ll see risk
assets trade slightly better through the day,” said Brian
Barry, a London-based analyst at Investec Bank Plc. “There is a
somewhat subdued feel to the market due to the fact we are
approaching year-end and investors are becoming more focused on
having their portfolios properly aligned.”

Sales Slow

Companies sold 4.6 billion euros ($6 billion) of bonds this
week, down from about 7.5 billion euros last week, according to
data compiled by Bloomberg.

Nexans, the world’s second-largest cable maker, is raising
250 million euros from senior unsecured notes due in 2018,
according to a person familiar with the matter. The Paris-based
company, rated BB by Standard & Poor’s, will price the notes to
yield about 4.625 percent, said the person, who asked not to be
named because they’re not authorized to speak about it.

JPMorgan is selling benchmark-sized 14-year bonds in
pounds, according to a person with knowledge of the matter.

Bonds of Barry Callebaut AG, the largest maker of bulk
chocolate, led declines in Bank of America Merrill Lynch’s Euro
Non-Financial index after it announced it will use debt to fund
its $950 million acquisition of a unit of Singapore-based Petra
Foods Ltd.

Barry Callebaut expects the debt-funded acquisition will
result in a downgrade to BB+, one step below its current
investment-grade ranking of BBB- by Standard & Poor’s and
equivalent Baa3 by Moody’s Investors Service. The company has
the potential to regain its investment-grade status in a few
years, it said in the statement.

The Zurich-based company’s 5.875 percent bonds due 2021
dropped 2.5 percent to 115.83 cents on the euro, pushing the
yield to a three-month high of 3.3 percent, data compiled by
Bloomberg show.

Risk Falls

The Markit iTraxx Financial Index of credit-default swaps
on senior debt issued by banks and insurers fell one basis point
to 151. The financial subordinated index dropped two basis
points to 260.

The Markit iTraxx Crossover Index of 125 companies with
investment-grade ratings declined one basis point to 114.

A basis point on a credit-default swap protecting 10
million euros of debt from default for five years is equivalent
to 1,000 euros a year. Swaps pay the buyer face value in
exchange for the underlying securities or the cash equivalent
should a borrower fail to adhere to its debt agreements.